What Is MA Schedule X and How to Use It for Tax Filing?
Learn how MA Schedule X impacts your state tax return, including income adjustments, deductions, and reporting differences between federal and state taxes.
Massachusetts tax filers may come across Schedule X when completing their state income tax return. This form adjusts federal taxable income to align with Massachusetts tax law. Understanding how to use it correctly ensures accurate reporting and prevents issues with the Department of Revenue.
Purpose of This Schedule
Schedule X modifies a taxpayer’s federal taxable income to comply with Massachusetts tax law. The state does not fully conform to federal tax rules, requiring adjustments for certain income and deductions.
For example, interest from non-Massachusetts municipal bonds is tax-exempt federally but taxable in Massachusetts. Some employer benefits and retirement distributions are also treated differently. Additionally, Massachusetts does not follow federal bonus depreciation rules for business assets, requiring an adjustment. These differences can significantly impact taxable income, making it essential for filers to review Schedule X carefully.
Determining Additions to Income
Certain types of income must be added back to federal adjusted gross income (AGI) when calculating Massachusetts taxable income. These additions arise from differences between federal and state tax treatment.
State and local income taxes deducted on a federal return must be added back, as Massachusetts does not allow this deduction. Similarly, contributions to a Health Savings Account (HSA) deducted federally must be included in state taxable income.
Investment income also requires adjustments. Interest from out-of-state municipal bonds is taxable in Massachusetts, even if exempt federally. Additionally, capital gains exclusions such as those for small business stock sales under Section 1202 are not recognized by Massachusetts and must be added back.
Claiming Deductions Under This Schedule
Massachusetts allows deductions that reduce taxable income, some of which must be reported on Schedule X.
One key deduction is for student loan interest. Unlike the federal deduction, which is capped at $2,500 and phases out at higher incomes, Massachusetts allows the deduction without income limits.
Contributions to the Massachusetts 529 college savings plan, known as the U.Fund, are deductible—up to $1,000 for single filers and $2,000 for married couples filing jointly. Contributions to out-of-state 529 plans do not qualify.
Renters can deduct 50% of their annual rent, up to $4,000, if the rental property is their primary residence and they have no ownership interest in it. This deduction is particularly beneficial in high-rent areas such as Boston, Cambridge, and Somerville.
Reporting Federal and State Differences
Massachusetts tax law differs from federal regulations in several ways, requiring income and deduction adjustments.
Business expenses are one example. While federal law allows deductions for meal and entertainment expenses up to 50%, Massachusetts disallows entertainment expenses entirely, requiring taxpayers to add them back.
Depreciation rules also differ. The federal Section 179 expensing limit is $1,220,000 in 2024, with a phase-out threshold beginning at $3,050,000. Massachusetts does not conform to this limit and imposes its own restrictions on immediate expensing of business assets. The state also does not allow 100% bonus depreciation, requiring adjustments to depreciation calculations.
Correcting an Error on the Schedule
Mistakes on Schedule X can lead to miscalculations of taxable income, potentially resulting in penalties or delayed refunds. If an error is found after filing, taxpayers must amend their return.
To do so, they must submit Form ABT (Application for Abatement) along with a corrected Schedule X. If additional tax is owed, interest and penalties may apply. Massachusetts generally allows amendments within three years of the filing deadline. Keeping detailed records of income and deductions can help prevent errors and simplify corrections.
Required Supporting Documents
Supporting documentation may be required to substantiate income additions or deductions. The Massachusetts Department of Revenue may request these records during an audit or review. Taxpayers should retain relevant documents for at least three years after filing.
For income additions, necessary documents may include 1099-INT forms for out-of-state municipal bond interest, W-2 statements reflecting taxable employer benefits, or federal tax return schedules detailing disallowed deductions. Business owners adjusting depreciation or expense deductions should keep asset depreciation schedules and financial statements.
For deductions, taxpayers should retain lender statements for student loan interest, contribution records for Massachusetts 529 plans, and lease agreements or rent receipts for the rental deduction. Proper documentation ensures compliance and protects against potential tax disputes.